The SETAPAK program promotes good forest and land governance as fundamental to achieving sustainable forest management, reducing greenhouse gas emissions, and supporting low carbon economic growth. Civil society has an important role to play in maintaining good governance by advocating for effective oversight of extractive industries, protection against damaging environmental and social impacts, and ensuring that revenues are collected by the government in order to return a development benefit. SETAPAK partners are forming strategic partnerships with regional government agencies to review mining permits, and to investigate mining companies’ operations adhere to permit requirements including environmental laws and the payment of royalties and taxes. This will ensure that environmental laws are enforced equitably, effectively, and transparently.

Mining is one of the Indonesian government’s most important sources of revenue, however significant losses occur because of poor governance. SETAPAK partners have been working to improve governance across the mining sector through strategic partnerships with government agencies in three provinces and at the national level. Over IDR 10 trillion (US $750 million) in state revenues has been paid to the government following investigations. In the SETAPAK provinces of Aceh, South Sumatra, Riau, Jambi, West, East and North Kalimantan, and Central Sulawesi, 547 mining permits have been revoked as a result of joint monitoring efforts.

Mining Sector Leaking State Revenues

In 2014, revenue from the mining sector reached IDR 37.37 trillion (USD $2.8 billion), contributing around 10 percent of total state revenue. Government revenue from mining comes mainly in the form of royalties and land rent. In the decade prior, Indonesia’s coal consumption more than doubled, in parallel with the country’s economic growth. Coal mining permits cover over 17.5 million ha of Indonesia’s land area, the equivalent of the entire land area of the United Kingdom. By 2014, Indonesia was the world’s largest exporter of thermal coal, with nearly 80 percent of coal mined sold to China and India, as well as South Korea, Japan and Taiwan. The same year however saw a reduction in international prices for coal and a drop in global demand, particularly from China, which has significantly impacted Indonesia’s coal production and revenues.

The boom in coal mining was not matched with well-managed mining permits and operations. District heads became empowered by decentralization laws, particularly the 2009 Minerals and Coal Mining Law, to issue permits for small to medium-sized mining operations. These new powers did not coincide with increased capacity and budget for managing coal mining permitting and monitoring operations of coal mining companies. Coal mining developers moved in quickly to extract Indonesia’s coal during the boom period. Poor management and control of the mining permitting process led to an excess of mining permits being issued by the district government, without adequate oversight or enforcement of related laws, allowing coal mining to operate largely unchecked with a high environmental, social and economic cost to local communities. Coal mining in Indonesia is predominantly in the form of open cut or strip mining, where concession areas are cleared of vegetation and surface soil removed in order to access the coal seam. As the boom slowed, coal mining pits were left abandoned, forests depleted, and communities devastated by the social impacts of environmental destruction caused by poor management of mining operations.

Coal mining in Berau, East Kalimantan (Source: Armin Hari)

the beginning of nationwide investigations into the mining sector led by the Corruption Eradication Commission (Komisi Pemberantasan Korupsi, KPK) it was revealed that reclamation funds have not been paid by nearly 90 percent of the 10,992 mining permits issued across Indonesia. In December 2015, following advocacy efforts by SETAPAK partner NGO Publish What You Pay Indonesia (PWYP), the Ministry of Environment and Mineral Resources formalized a decree setting out the process for regional governments to evaluate coal and mineral mining permits (decree no. 43 of 2015). The decree implements the changes set out in the Regional Governance Law (no. 23 of 2014), which moved control for granting new permits for mining concessions from districts to central and provincial authorities. Governors across Indonesia’s 34 provinces were given until 31 March 2017 to ensure that mining permits met clean and clear standards, meaning that they don’t overlap with other license areas, comply with financial regulations and key aspects of national law, and that rehabilitation funds are collected and saved in a government bank account.

The handover process from district to provincial government has revealed that many mining permit documents are missing entirely, including environmental impact assessments, land boundary maps, site reclamation plans and records of royalty and land rent payments. SETAPAK partners are using the handover process between levels of government in each province to assess mining operations and compare these with the existing permit documentation to ensure that all non-clean and clear permits are revoked. SETAPAK has identified that regional governments lack the technical capacity or sufficient resources to conduct oversight of the poorly governed mining sector, and to impose and monitor rehabilitation obligations when mining ceases.

Coal barge pulled along the Mahakam river in Samarinda, East Kalimantan. (Source: JATAM East Kalimantan)

Enhancing Governance Through Collaborative Monitoring

Following dedicated efforts by civil society groups to highlight environmental damage, land conflicts, and revenue losses associated with the huge swathe of mining permits issued by district heads, in 2014 the KPK turned its attention for the first time to the mining industry. Working with the Supreme Audit Agency, the Ministry of Energy and Mineral Resources, and other agencies, the KPK investigation, called Korsup Minerba, first focused on the 12 provinces with the largest number of mining permits – including SETAPAK regions Aceh, South Sumatra, West Kalimantan, East Kalimantan and Central Sulawesi. In 2015, the Korsup Minerba extended to 19 provinces, taking in the SETAPAK provinces of North Kalimantan, Riau and West Sumatera.

Crack Down on the Mining Sector

When investigations began in February 2014 there were a total of 10,992 locally-issued mining permits across Indonesia. Within a year, investigations revealed that 40 percent of these permits did not comply with a basic measure of legal adherence, called clean and clear. Clean and clear is a paper-based measure of companies’ adherence to permitting standards, assessing that companies pay royalty or other tax debts, that rehabilitation funds are collected and saved in a government bank account, that exploration and environmental commitments have been fulfilled, and that concession areas do not overlap with protected forest areas or with other companies’ concessions, including for palm oil and timber plantations.

SETAPAK NGO partners have been instrumental in supporting the KPK’s investigations into the mining sector. By accessing permit information using Freedom of Information Laws, SETAPAK NGO partners then reviewed the clean and clear status of permits. NGO partners in Aceh, South Sumatra, West, East and North Kalimantan and Central Sulawesi also produced position papers outlining permit violations in each province and the resultant state losses, which was formally presented to the KPK and the provincial government. As a result of the KPK investigations, by April 2017, 2,187 permits had been cancelled or their operational period had ended and not been extended. The investigations also resulted in the collection of a significant IDR 10 trillion (US $750 million) in state revenues, in the form of taxes and royalties.  Debts from permits have reduced from a total of IDR 6.65 trillion owed in December 2016, to IDR 5.07 trillion.

In response to provincial government requests for further support in reviewing mining permits, SETAPAK local NGO partners formed working groups with regional governments in Aceh, South Sumatra and West and East Kalimantan. The NGO’s provided training and mentoring to help strengthen government capacity in the review of mining permits issued across the provinces. Partnerships between SETAPAK partners and provincial mining agencies have been effective in reviewing the mining companies’ clean and clear status. The review in Aceh revealed that of the 138 mining permits active in the province, 80 permits – covering a total area of 434,000 ha of land – did not comply with clean and clear standards and have been revoked by the government, or have had their operational period ended without extension. In South Sumatra, 177 non-clean and clear mining permits have been revoked, and SETAPAK partner PINUS are assisting the government to develop a mechanism for re-registering mining permits, with complete documentation including AMDAL, a land map, and a detailed site reclamation plan. In West Kalimantan, the review revealed that 104 mining permits covering a total of 1.25 million ha across the province did not comply with clean and clear requirements, and already 80 mining permits have been revoked by the provincial government, and IDR 80 billion has been collected in the form of royalties and land rent.

Director General of Law Enforcement, Rasio Ridho Sani (far right), and the then Director of Environmental Compliance and Enforcement Systems, Ms Rosa Vivien Ratnawatai (third from left) MoEF visited several abandoned mining sites in East Kalimantan following SETAPAK partners’ efforts to engage in policy dialogue with government (Source: JATAM East Kalimantan).

In East Kalimantan, JATAM East Kalimantan leveraged the momentum of the increased focus on mining governance to report deaths by drowning in former mining sites in the province to Rasio Ridho Sani, Director General of Law Enforcement, MoEF and his team. SETAPAK arranged a field visit on the first of February 2016 for the Director-General to observe the 150 abandoned mine pits in Samarinda. As a result, the Director-General shut down four mining companies’ concessions.

SETAPAK partners are now applying their learning experience from the Korsup Minerba investigations to the forestry and plantation sectors. A national coalition has been formed to push for improved governance in all land-based sectors, called the National Movement for Natural Resource Protection (Gerakan Nasional Penyelamatan Sumber Daya Alam, GNPSDA), with SETAPAK partner NGOs playing a role reviewing forestry and plantation permits, cross checking data in the field, and accessing permit documentation through information requests. Through a concerted and sector-wide effort, this coalition is investigating the legality of timber and plantation operations, and pushing for sanctions to be enforced where violations are evident.